The main aim of stock picking is to find the market-beating stocks. But in any portfolio, there will be mixed results between individual stocks. So we wouldn't blame long term Altria Group, Inc. (NYSE:MO) shareholders for doubting their decision to hold, with the stock down 34% over a half decade. Even worse, it's down 9.2% in about a month, which isn't fun at all. We do note, however, that the broader market is down 9.6% in that period, and this may have weighed on the share price.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
Before we look at the performance, you might like to know that our analysis indicates that MO is potentially undervalued!
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the five years over which the share price declined, Altria Group's earnings per share (EPS) dropped by 34% each year. This fall in the EPS is worse than the 8% compound annual share price fall. So the market may previously have expected a drop, or else it expects the situation will improve.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
This free interactive report on Altria Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Altria Group's TSR for the last 5 years was -7.2%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While it's never nice to take a loss, Altria Group shareholders can take comfort that , including dividends,their trailing twelve month loss of 7.1% wasn't as bad as the market loss of around 22%. Given the total loss of 1.4% per year over five years, it seems returns have deteriorated in the last twelve months. Whilst Baron Rothschild does tell the investor "buy when there's blood in the streets, even if the blood is your own", buyers would need to examine the data carefully to be comfortable that the business itself is sound. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 3 warning signs for Altria Group that you should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Altria Group, Inc., through its subsidiaries, manufactures and sells smokeable and oral tobacco products in the United States.
The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.
|Analysis Area||Score (0-6)|
Read more about these checks in the individual report sections or in our analysis model.
Established dividend payer with proven track record.